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Log In / Register | Jul 22, 2018

Court Grants KFC Franchisees Final Authority on Advertising

LOUISVILLE, KY – A Delaware court handed down its final order today granting judgment to the National Council and Advertising Cooperative (NCAC), stating KFC Corporation does not have the sole authority over advertising. On January 31, Vice Chancellor Leo E. Strine, Jr. issued his  65-page opinion (pdf) ruling in favor of the existing agreement between the parties, which allowed the co-op to develop and modify advertising over any KFC objections.

In hearing the ruling, John R. Neal, vice chair of the NCAC, said, “We are pleased with the order and final judgment and we  look forward to continually working to build the KFC brand.”

The 17-member NCAC “Committee” serves as the governing body of the co-operative and consists of four company officials and 13 franchisees. Its two main functions are the generation of advertising plans for the KFC brand and the approval of specific KFC advertisements. Central to the dispute was the disagreement between the company and its franchisees-controlled national council as to who has the authority of those functions.

The lawsuit, filed in January 2010, sought declaratory and injunctive relief under its certificate of incorporation and bylaws against the chicken restaurant chain when it began an aggressive advertising campaign to shift the brand to “grilled” chicken from the traditional 65-year old “fried” secret recipe. KFC, a division of Yum Brands (NYSE:YUM) since 1997, claimed it had the “sole authority” to recommend advertising and strategy.

Vice Chancellor Strine declared in his order that the NCAC Committee will provide guidance to KFC on what products to feature in its advertising process and when. He added that the franchisor has a duty to implement that plan in good faith.

The Chancellor added a caveat. KFCC does not have a duty, if it acts in good faith, to develop and air commercials or adopt advertising themes that it and the advertising agency think harmful to the KFC brand or that are not consistent with brand standards.

As part of the court order, each side will bear its own costs.

KFC Corporation did not meet deadline to make comments regarding the final judgment.

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About Janet Sparks

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Janet Sparks is the former publisher of the Continental Franchise Review, an industry newsletter that covered the franchise community for over 30 years. She has also been a columnist for a leading franchise magazine for the past 13 years. Today she is an independent journalist who engages in investigative reporting, tackling complex issues that impact the franchise industry.

Janet can be reached at jsparks@bluemaumau.org or at 303-799-7398.